Shortsale are lenders willing to do them?
Today, many lenders are willing to engage in shortsale real estate transactions in order to avoid the expense of foreclosure. In a nutshell, when a lender accepts less money than is owed on the loan, it is considered a shortsale. Sounds simple, but the process is actually quite involved. If you do it correctly, you can walk away from your home without owing a dime.
The first step to negotiating a shortsale is to contact your lender. It's important to realize the lender isn't going to be eager to accept a short sale. Lenders are in business to make a profit and they aren't going to accept the first offer you throw their way. Be prepared for rejection and be prepared to be persistent.
Before accepting a shortsale offer, the lender is going to want details about your financial situation. Prior to calling, organize your bills and make a list of expenses and income. Compose a letter of hardship and express how difficult it will be to continue making payments. Make a list of everything wrong with the house. If it needs paint, windows, flooring, a new roof - put it on the list. Walk through each room and make a list of every repair that needs to be done.
Another bargaining chip in negotiating a shortsale is to list problems in the area where your home is located. If there are multiple foreclosure homes in the area, or an increase or high incidence of crime, it could work to your advantage during the negotiation process. Report anything negative that devalues property.
This is not to be interpreted as making things up that don't exist. The lender will quickly catch on to those tactics when they appraise the property. It simply means to focus on the negative things that you would normally ignore. In order to obtain the lowest shortsale price possible, you must convince the lender that no possibility exists for you to obtain a sale offer for the balance of the loan.
There are two types of short sales - Deed in Lieu of Foreclosure and Deficiency Judgment. Under no circumstance do you want a deficiency judgment. What this means is while the lender agrees to a shortsale, they expect you to pay the difference between what the house is sold for and what you owe on the loan. If you owe $150,000 and sell for $130,000 you will owe the remaining $20,000.
Chances are you aren't in a position to obtain a loan for twenty grand. If you can't repay the balance, the lender will file a lien against you. If that occurs, you won't be able to obtain a loan, credit card, gas card and perhaps not even a bank account.
The Deed in Lieu of Foreclosure is the way to go. This option lets you sell your home for a predetermined amount during a specific period of time. The trick is you either have to sell the home yourself or work with a realtor who is willing to help you find a buyer. Realtors do not earn as much commission when dealing with shortsales and most are not eager to engage in them.
A word of caution about shortsales -- they may be viewed as debt relief and treated as income. If so, the difference between the sale price and loan balance will be subject to income tax. Consult with your accountant to ensure you adhere to tax laws. Otherwise, you could receive a hefty penalty.
If you have property approved for shortsale, we'd like to help and eliminate the financial stress you've been enduring. Our nationwide network of investors has allowed hundreds of people just like you. To learn more about the services we offer, fill out our secure Shortsale Form and one of our consultants will contact you.
Published on November 12, 2007 at 03:38 PM